Qantas gets its hand whacked

Labor and Qantas themselves previously have been on the verge of liberalising the airline’s foreign ownership restrictions.
Photo: Glenn Hunt

by
The Australian Financial Review

Not for the first time under the still-new Coalition government, a private business has gone to Canberra with its hand out only to be given a prime ministerial whack for doing so.
Tony Abbott
’s Monday evening post-cabinet press conference was striking for his dismissal of
Qantas
’s bid for some sort of debt guarantee or loan facility to help a capacity war with rival
Virgin Australia
that is costing both airlines hundreds of millions of dollars. More extraordinary was his declaration that the various ­foreign ownership restrictions that hamper Qantas’s access to capital should be removed to level the playing field with Virgin; that Qantas should consider a Virgin-like corporate structure that allowed majority foreign ownership of its domestic operations but preserved majority domestic ownership of its international business to fit in with the system of global aviation rights; and that this would still leave Qantas as essentially an Australian company because it carried mostly Australian passengers and employed Australian staff.

This is the last thing Qantas chief executive
Alan Joyce
bargained for when launching his bid for government support late last year. Mr Joyce could be forgiven for thinking he had sold the deal to make an exception of Qantas when Treasurer
Joe Hockey
appeared to favourably tick it off a few weeks ago and when the Qantas chief followed through with a large-scale cost-cutting announcement. Instead, Qantas and the Abbott government now are at loggerheads. Mr Joyce says any significant relaxation of foreign ownership will struggle to get through the Senate soon enough to matter. Qantas and Mr Hockey are trading verbal blows over whether Labor’s carbon tax is significantly contributing to the airline’s woes. And Mr Abbott pointedly suggests that, with “good management", there is no reason why Qantas couldn’t be profitable. This is re-setting the relationship between Canberra and the corporate sector, after Mr Abbott touched up
Coca-Cola Amatil
chairman
David Gonski
after rejecting his fruit cannery subsidiary’s bid for a taxpayer handout and Mr Hockey blamed
Toyota
’s troubled workplace deal for the car makers’ woes.

Pushing in the right direction

But, as The Australian Financial Review has argued before, Mr Abbott and now Mr Hockey are at least pushing in the right direction on Qantas – as they did with
SPC Ardmona
and the car companies. For Qantas, it is hard to support calls to put taxpayers on the hook in order to help one private company defend its 65 per cent share of domestic airline travel. As Mr Abbott says, special treatment for the dominant airline would generate demands by rivals such as Virgin and regional operator Rex. If the playing field is tilted against Qantas, the best approach is to tackle the issue at source. And this goes straight to the foreign ownership restrictions singularly imposed on Qantas and the whole notion of an Australian-owned national carrier.

Settling on a clear position

This is an emotion-heavy debate. On the ABC’s Q&A program on Monday night, a musician panellist suggested that musicians flew Virgin because it better treated their instruments – but then called for Qantas to be protected and insulated from competition. In Canberra, both sides of politics pulled out quotes that jarred with each others’ current positions. As with car subsidies, the Coalition’s messaging on Qantas has been messy before settling on a clear position. But is also is clear that Labor and Qantas themselves previously have been on the verge of seeking to liberalise the airline’s foreign ownership restrictions. In 2002, Labor’s then transport spokesman
Martin Ferguson
declared: “Labor is on the record as having an open mind on the relaxing of the 49 per cent foreign ownership cap on Qantas as we recognise that without significant capital investment the airline is putting at risk its future international and domestic competitiveness". In general, the corporate structures of individual companies should not be the business of politicians. But Mr Abbott has set out how a less-constrained Qantas could compete on more even terms.